Even though the implementation of the Secure and Fair Enforcement of Mortgage Licensing Act was supposed to create a national set of standards for all mortgage originators, concerns that mortgage brokers and mortgage bankers are currently on an uneven playing field when it comes to becoming a registered loan officer persist.
During the New York Association of Mortgage Brokers annual convention last month in Melville, N.Y., Origination News spoke with members of the organization who believe mortgage bankers should have to adhere to the same standards and compliance requirements as mortgage brokers in order to work with a consumer.
Currently, New York mortgage brokers are required to take pre-licensing courses and continuing education classes in order to maintain their brokerage registrations. They also have to pass mandated national and state tests, while mortgage bankers do not have to follow these obligations.
A mortgage loan originator who works at a bank will be listed as an active worker in the Nationwide Mortgage Licensing System & Registry, but how much experience do these individuals really have conducting this type of work? A consumer can not determine the educational experience this person has been working at a federally chartered institution and whether they are officially licensed to originate loans for them.
Participants in the discussion moderated by Evan Nemeroff, a reporter for Origination News, include Mary Ann Pino, president of the New York Association of Mortgage Brokers; Martin Pfeiffenberger, vice president of the New York Association of Mortgage Brokers; Irene Amato, lower Hudson Valley regional president; Lou Borsellino, president-elect of the New York Association of Mortgage Brokers; Gene Tricozzi, legislative chair of the New York Association of Mortgage Brokers; and Bonnie Nachamie, treasurer of the New York Association of Mortgage Brokers.
The NYAMB members spoke about whether stricter education requirements are a factor as to why the number of registered mortgage brokers has decreased by 43% since December 2009, according to the New York State Banking Department. The participants also described how their regional markets are performing throughout the state and how they are purchasing and taking advantage of bank reject loans.
Nemeroff: How are brokers in New York adjusting to the life under the [Secure and Fair Enforcement of Mortgage Licensing] Act?
Pino: I would have to say that they are adjusting quite nicely. The systems that are in place for the [Nationwide Mortgage Licensing System] with providing guidance on the renewal process and educational requirements are nicely done. They have a very good call center to help us out. But overall the [New York Association of Mortgage Brokers] had worked diligently to prepare their members in advance for the implementation of the SAFE Act in making sure they met all the requirements.
Amato: I feel that the [Secure and Fair Enforcement of Mortgage Licensing] Act did weed out a lot of unprofessional brokers in the industry and I think it has left probably the best breed of brokers that there are.
Tricozzi: One of the things it has done is brought professionalism to the broker's side. But the problem is from the position of the consumer that that same professionalism hasn't been extended to the mortgage bankers MLOs. So the originators for the bankers don't have to complete the same requirements that we do. I feel that we're in better position than they are.
Pino: Are you talking about the registered [mortgage loan officers] or the licensed depositories?
Tricozzi: Federally chartered banks.
Amato: They are not held to the same standards as we are. They were recently required to register, but until this time, they were not required to register. They do not have to pass the state and national federal tests. They do not have to take the prelicensing courses or continuing education that we do. We are told they are doing this through the federally chartered institutions, but it is not being recorded. Again, they are just registered, but not licensed, like we are and held to the same standards as the mortgage brokers and bankers are. Therefore, if you're shopping for a mortgage and you're going to a federally chartered institution versus a mortgage broker or banker, you could be getting someone that's not as educated and isn't held to the same standards.
Borsellino: This is actually benefiting us in one way as far as how people understand what we go through and we try to explain that to them with the testing and education. People should understand that somebody could work at a bank and have six months worth of experience originating loans rather than having a mortgage broker who has been in the business for 22 years.
Amato: All of the mortgage brokers that have survived through what we have had to go through the past two years are probably the best in the business. The brokers and [mortgage loan officers] that are licensed have really been put through a lot of education, classes and tests.
Nemeroff: Registered brokers are down this year compared to previous years. Do you think all of those classes and education requirements impact how many people sign up to become a broker?
Nachamie: We're in very interesting economic times and there has been incredible shrinkage in the mortgage industry. Our economy is suffering dramatically. When it was a robust, healthy and vibrant business five or six years ago, there were a lot of people entering the business. The economy's become such that it may not provide the same profitability or opportunity, then you will have shrinkage in an industry. I can't pinpoint though that it is any one given cause and I certainly don't believe that people who are committed to helping people obtain mortgages left the industry because of educational requirements or testing requirements. I think that is a very myopic look.
Tricozzi: We have been working very diligently for the past 15 or 16 years looking to bring education requirements to the mortgage broker's industry. We wanted education requirements to bring more professionalism into the industry and have been fighting for this for a very long time. It's more of a “be careful of what you wish for” type of thing.
Pfeiffenberger: I agree and think [the New York Association of Mortgage Brokers] has been so behind it that we came to the core front with an education format right out of the gate to provide it pretty quickly and seamlessly right away. I don't have any empirical data, but I strongly believe that the mortgage broker passing this test was extremely high. People who have been in the business for years really had no issue with the tests.
Pino: We have a situation as to where do you gauge the knowledge and expertise on the federal level. If you are not conducting an exam and these individuals are not being required to pass it, then how are these regulated entities gauging the knowledge base of these individuals that are helping the consumers? Ultimately, this hurts the consumer because if you don't have these checks and balances in place and the passing of an exam and the continuing education requirements makes sure that you're adequately prepared to deal with the consumer's needs.
Nachamie: Consumer confidence is down and the housing market is suffering. If people are not buying homes and are not refinancing, then the people who are originating those loans are not making the living to support their own families.
Nemeroff: Regionally, how are your individual markets performing right now?
Pfeiffenberger: I'm from the Albany area. The first half of the year, we were good. But the last three or four months, business has probably tripled. I will say a good 20% to 24% of our business comes from bank rejects because they don't know how to put loans together. Lately, the wholesale side has gotten so busy that turn times have gotten very long. I wouldn't even say the proliferation of refinances cause we're still at a 70% purchase shop and that really hasn't wavered a lot. It's not like we're just a refinance shop and rates got lower and we've gotten busier, it's definitely improved for us.
Amato: I also do about 80% of purchases. I definitely pick up a lot of bank rejects unfortunately. Again, it all goes back to the education because I don't think they know what to tell the consumers. As far as the market itself, I'm finding bidding wars again on finding property values are definitely rising in my area (the lower Hudson Valley region). What I'm finding is that we need to pull up the appraised values because some of the short sales that are included in these appraisals are bringing the values down. What's good about it is that people are aware that the market is coming up and are willing to pay the price for the house. If it is $10,000 higher, they are willing to pay this. That is driving the appraised values higher, which is a good thing.
Borsellino: I am definitely seeing bidding wars, not over the amount, but obviously below the asking price. But there is a lot more competition for certain priced homes. The bigger homes valued at $700,000 to $800,000 homes are not going in my area, but the smaller houses, your starters and two- to four-bedroom homes, are starting to go. I am also getting the same thing with the fallouts from the banks.
Pino: What are the fallouts with? Is it because they don't have the service, the turn times or the prop lines?
Borsellino: It's their prop lines because they put it through straight this way, but basically can't do it this way.
Tricozzi: The market in my area in Clifton Park has picked up as well. What I'm finding also in terms of pickup in the market is rehabilitation loans. People are choosing to stay in their homes because of lower values and then using that program to improve the home and make it more livable as opposed to moving to another home. It goes back to the product line, as a lot of the lenders do not offer that. So as a broker, having that product in hand has helped us out in terms of additional products to offer the consumers they can't get anywhere else.
Nachamie: We have better quality loans now with more qualified borrowers.
